Investment Rating - The report indicates a shift in investment ratings for the EV and solar industries, with a more favorable outlook for energy storage systems (ESS) and critical minerals compared to solar and wind [16]. Core Insights - The "One Big Beautiful Bill" accelerates the phaseout of EV subsidies, expiring on September 30, 2025, compared to December 31, 2032, under the original IRA [16]. - The report highlights stricter restrictions on foreign entities, particularly from China, affecting the eligibility for investment tax credits (ITC) and advanced manufacturing production credits (AMPC) [16][17]. - There is a notable increase in domestic content requirements to qualify for additional credits, which may impact the cost structure for manufacturers [16][17]. Summary by Sections Part 1: EV Consumer Tax Credits - The final assembly of EVs must occur in North America to qualify for tax credits, with a maximum credit of $7,500 [6]. - Key requirements include MSRP limits of $80,000 for SUVs and $50,000 for other vehicles, with critical minerals and battery component restrictions starting in 2024 and 2025 respectively [6][7]. Part 2: Residential Clean Energy Credit - The residential clean energy credit remains at 30% for expenditures through December 2032, decreasing to 26% in 2033 and 22% in 2034 [10]. - No credits will be available for expenditures made after December 31, 2034 [10]. Part 3: ITC - The business tax credit for investment in zero-emission power and energy storage property is set at 30% of capital expenditures, with additional bonuses for domestic content [12]. - The credit rate will phase out based on the date of construction start, with specific thresholds for solar and energy storage systems [12]. Part 4: Advanced Manufacturing Production Credit - The AMPC will phase out for eligible components produced and sold, with a stricter non-PFE threshold compared to the Senate draft [13]. - The report emphasizes that projects with "effective control" by prohibited foreign entities will not receive credits, impacting U.S. battery production using Chinese components [16][17]. Key Changes vs. IRA - The report outlines significant changes from the original IRA, including the introduction of PFE restrictions and a more stringent domestic content requirement for tax credits [16]. - The overall stance on China has become tougher, with implications for U.S. manufacturers relying on foreign supply chains [16].

Investment Rating - The report initiates CATL-H with an Overweight (OW) rating and a price target (PT) of HK$400, indicating a 25% upside from the previous close. CATL-A is upgraded to OW with a PT of Rmb370 from Not Rated [2][6]. Core Insights - The Chinese EV battery supply chain stocks have rebounded by 8-17% since April, driven by CATL-H's strong performance post-listing and ongoing investment interest in solid-state batteries [2]. - Industry capacity utilization rates have improved, with key players achieving over 80% utilization in the second half of 2024, leading to a new capital expenditure (capex) cycle [5][10]. - Battery prices have stabilized after significant declines, with some players in the energy storage system (ESS) segment experiencing price recovery due to strong demand [5][10]. Summary by Sections Industry Capacity Utilization - The report notes a recovery in industry capacity utilization rates, with improvements seen in 2024, particularly in the second half, driven by better-than-expected demand for EVs and ESS [10][12]. - A significant increase in new orders for battery equipment is anticipated in 2025, with top suppliers expecting over a 45% increase compared to 2024 [5][12]. Battery Prices and Market Dynamics - Battery prices for lithium iron phosphate (LFP) and nickel-cobalt-manganese (NCM) have decreased by 40-60% from their peak in late 2022/early 2023, but have stabilized in 2024 despite a further 20% drop in lithium carbonate prices [5][10]. - Select ESS battery manufacturers have seen a small price recovery, attributed to robust domestic and international demand [5]. Financial Performance and Projections - CATL's shipments for EV and ESS batteries are projected to reach 475 GWh in 2024, up from 390 GWh in 2023, with a strong performance expected in the second half of 2024 [31]. - The report provides a detailed comparison of battery makers' financial results, highlighting CATL's gross profit margin (GPM) improvements and net profit per unit stability [35][40]. Market Share and Competitive Landscape - CATL continues to dominate the Chinese EV battery market, with a significant share in both domestic and overseas markets, while competition remains intense among local players [7][38]. - The report discusses the implications of Chinese OEMs shortening payment terms to suppliers, expressing skepticism about its impact on material suppliers' cash flow [5].